Boehner plan pushes deep cuts

Speaker John Boehner’s two-step plan to raise the debt ceiling by upwards of $2.5 trillion would require the White House to accept much deeper spending cuts than he was negotiating only last week with President Barack Obama.

Unveiled Monday, the proposal appears to take back Boehner’s prior offers to allow an $800 billion increase in tax revenues but his new spending demands are significant in themselves and could amount to $600 billion more over 10 years when compared with the White House talks.

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Two installments on the debt increase are anticipated, according to a summary document released prior to a House Republican conference on the proposal.

The first debt limit increase of between $900 billion to $1 trillion would be accompanied by strict discretionary spending caps designed to achieve 10 year savings of $1.2 trillion from annual appropriations bills. The second installment of up to $1.6 trillion would be contingent on first achieving $1.8 trillion more in savings largely from government benefit programs and entitlements such as Medicare and Medicaid.

This breakdown follows the basic framework discussed with the White House but leans forward in each case toward demanding more savings.

The Boehner plan gives less credit than the White House for the savings that would come from the proposed cuts in appropriations. And this makes it harder for lawmakers to meet the next goal of coming up with another $1.8 trillion in savings for the second debt increase installment.

That assignment will fall to a proposed joint committee to report back to Congress later this year. The White House talks identified significant savings from entitlement programs with the administration estimating the total at almost $800 billion while Republicans hoped for close to $950 billion.

But even taking the higher GOP number and adding 20 percent for future interest savings, the net deficit reduction would be less than $1.2 trillion—or $600 billion less than the goal set by the Boehner plan. The committee would then have to make new entitlement cuts or revisit the question of discretionary spending, since Republicans have refused to consider any tax increases.

That difference will help Boehner get the added conservative votes he needs to get his bill through the House this week. But it raises the stakes for Senate Democrats who are demanding that some savings credit be given for winding down U.S. military operations in Iraq and Afghanistan.

This is a major reason why Senate Majority Leader Harry Reid has included large war savings in his alternative to Boehner. And if there is a compromise to be reached between the two sides this week, much will depend on whether Boehner is willing to consider these savings as part of the joint committee’s future recommendations.